Ninebot Limited (SHSE:689009) Stocks Shoot Up 25% But Its P/E Still Looks Reasonable

Those holding Ninebot Limited (SHSE:689009) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

Since its price has surged higher, Ninebot may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 51x, since almost half of all companies in China have P/E ratios under 28x and even P/E's lower than 17x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Recent times have been pleasing for Ninebot as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Ninebot

Want the full picture on analyst estimates for the company? Then our free report on Ninebot will help you uncover what's on the horizon.

How Is Ninebot's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Ninebot's to be considered reasonable.

If we review the last year of earnings growth, the company posted a worthy increase of 4.9%. Still, EPS has barely risen at all in aggregate from three years ago, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 57% during the coming year according to the seven analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 41%, which is noticeably less attractive.

In light of this, it's understandable that Ninebot's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Ninebot's P/E

Ninebot's P/E is flying high just like its stock has during the last month. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Ninebot's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Ninebot that you should be aware of.

If these risks are making you reconsider your opinion on Ninebot, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.